We have a HELOC that was foreclosed and 100%charged off. The borrowers got back to us and want to work with us on this. They are going to pay the account current and then we are going to close the HELOC account. We are then adding another borrower and opening a closed-end loan. At this time my special assets team wants to do all this through a forbearance agreement.

This is all being done as a work out loan but I am wondering if we are required to give the borrowers new initial and final TILA disclosures in this situation?


Thanks.

We are then adding another borrower and opening a closed-end loan.

What exclusion are you using to say this is not subject to all of the Truth-in-Lending requirements?

and opening a closed-end loan.

As Randy asked, what exclusion are you relying on? Since you are converting this to a closed-end loan you can't use the work-out exclusion in 1026.9. That exemption is for open-end credit. You also can't rely on the workout exclusion in 1026.20 because you do not currently have a closed-end loan it would apply to.

IMO you are making a new loan subject to TRID.

If you don't close the HELOC, but instead enter into a forebearance agreement for that loan, I don't think you'd be required to comply with closed end disclosures.

1026.40 Commentary

5. Payment terms—applicability of closed-end provisions and substantive rules. All payment terms that are provided for in the initial agreement are subject to the requirements of subpart B and not subpart C of the regulation. Payment terms that are subsequently added to the agreement may be subject to subpart B or to subpart C, depending on the circumstances. The following examples apply these general rules to different situations:

iii. If the consumer and creditor enter into an agreement during the draw period to repay all or part of the principal balance and the amount of available credit will not be replenished as the principal balance is repaid, the creditor must give closed-end credit disclosures pursuant to subpart C for that new agreement. In such cases, subpart B, including the substantive rules, does not apply to the closed-end credit transaction, although it will continue to apply to any remaining open-end credit available under the plan.